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My blog post about the filing, including the full text of the complaint, can be seen here.

Last week, as expected, ASI and Penguin filed a motion to dismiss, labeling authors' complaints "a series of gripes" that would be better served by filing individual suits, and seeking to remove Penguin from the lawsuit. According to Publishers Weekly,

In its motion to dismiss, Penguin attorneys offer a long list of legal and procedural issues for dismissal, as is common practice, and deem the complaint “a misguided attempt to make a federal class action out of a series of gripes.”

The motion also seeks to sever parent company Penguin, noting that “no specific misconduct” by Penguin is alleged. The motion says the case boils down to “alleged typographical and formatting errors and supposed delays in publishing their books,” and some “alleged errors associated with royalty payments owed” on some of the plaintiffs books published under Author Solutions imprints.

The plaintiffs may pursue "individual claims," Penguin attorneys argue, noting that the issues are contract issues "and nothing more," based upon "supposed errors, delays, or underpayments.” The remainder of the complaint and any potential class action, the motion states, should be dismissed.

Often viewed as experiments, these digital-only and digital-first imprints may offer less favorable terms than the publisher's standard contracts, in an effort to shift more of the risk to authors (one example: Random House's Hydra, Flirt, and Alibi imprints, a controversy that had a happy ending when Random House changed the imprints' deal terms to make them more author-friendly). Another potential problem: in the rush to take advantage of a burgeoning new market, plans may not be as carefully laid as they should be, and books may be acquired and pushed out too fast.

This seems to have been the case at Crimson Romance, F&W Media's digital romance imprint.

Some background: Crimson published its first book in June 2012, and has been issuing titles at a brisk pace ever since. Amazon shows nearly 300 to date, published at a rate of as many as 57 releases a month. Over half the titles are available in paperback, via POD.

I've seen several Crimson contracts. There are no advances. Books are published within six months of delivery (fast by traditional standards). Royalties are paid on the publisher's net (a.k.a. "gross amount received"), 30% for ebooks and 10% for print.The grant of rights is life-of-copyright, with a reversion clause that allows authors to request reversion if royalties fall below $250 in each of two consecutive royalty periods (royalty periods are six months). However, this is qualified somewhat by the fact that, as an alternative to simply returning rights, the publisher can choose to "[take] such steps as it is able to accelerate sales" beyond the $250 threshold; if it can manage that within six months of the author's reversion request, it doesn't have to revert. In other words, if the publisher can get sales to $251, it gets to keep authors' rights for at least two more royalty periods.*

Last month, I heard from a few Crimson authors about problems at the imprint. I put out a call for contact, and received a flood of emails.** The issues cited are very consistent, the most frequent being late or missing royalty statements and payments, paltry sales, and hasty and/or inadequate editing (some authors told me that mistakes in proof weren't corrected before publication; a number of reader reviews on Amazon cite typos and other errors, as does major romance review blog Dear Author). Many of the authors who contacted me also felt that Crimson had done little to market their books, beyond Kindle promotions on Amazon.

Authors' main beef, however, is Crimson's ebook subscription service. Launched in July 2012, the service allows readers to pay $12.99 a month and receive unlimited downloads from the entire Crimson catalog. But while the Crimson Romance contract grants the publisher the exclusive right to--

publish, reproduce, and distribute the Work in electronic book and enhanced electronic book format in the English language throughout the world

and to--

price, promote, market, and sell the Work as it deems suitable

and to--

combine [the Work] with any other material in any publication or product, [in which case] the “Gross Amount Received” shall be pro-rated according to the proportion that the Works bears to the publication or product as a whole

--the subscription service is not mentioned or described anywhere in the contract. Not surprisingly, there's also no mention of a payment plan.

Many authors felt blindsided when the service was announced, with no contract addendums and no commitments on how they would be compensated. Some also worried about piracy, since F&W has a DRM-free policy; and about reader abuse, since readers could conceivably sign up for one monthly fee, download the entire catalog, and then cancel their subscription. Others feared that Crimson's efforts to drive readers to the subscription service would discourage purchase of individual titles. Still others questioned whether Crimson had the right to implement the service at all (F&W told me that they feel the language I've quoted above covers the service, even though the service is not specifically described).

Authors' March 31, 2013 royalty statements didn't include subscription service income, and those who contacted Crimson to ask why discovered that there was still no payment plan in place. Not until April 23 was a payment plan formally announced. Using the contract royalty percentage, Crimson is allocating 30% of subscription income to authors. But instead of pro-rating authors' share based on the number of downloads, as many authors had expected, payment will be based on the amount of time each book has been available in the service. Crimson justifies this methodology thus (quoting the announcement letter):

Supporting this methodology is the nature of the service itself. It is the full portfolio of titles that drive the subscription revenue, rather than any one individual title. Readers are signing up for the service in order to browse the full selection of books; individual titles that are downloaded are not directly driving the site revenue...

[A]fter reviewing the language in the author contract, it was clear that every title in the program (whether or not it was downloaded) would need to receive compensation simply for being a part of the service.

In other words, authors whose books are not downloaded at all are compensated at the same rate as authors whose books have lots of downloads, and books that have been in the service longest get the biggest share, even if recent books are more popular. Additionally, Crimson is apparently not reporting actual download numbers; and since the subscription service earned only modest revenues in its first royalty period, royalties due were tiny, with books published in the last month of the royalty period receiving just $0.42.

Some fed-up authors lodged complaints with Romance Writers of America, which contacted F&W in early May to discuss the complaints and to argue that the third contract clause quoted above ("according to the proportion that the Works bears to the publication or product as a whole") supports a per-download pro-rata policy, rather than the methodology implemented by F&W. F&W did not agree, leading RWA to deem the interaction "not satisfactory."

Last week, I contacted F&W for comment on all of this. They acknowledged that they didn't plan carefully enough for the subscription service, and told me that they are working to answer authors' concerns in several specific ways:

- Authors who wish to opt out of the subscription service will be allowed to do so at the end of the current royalty period (June 30).

- New contracts will include a description of the subscription service and how authors are compensated for it.

- An additional round of copy editing is being implemented to address authors'--and readers'--concerns about quality.

There's also a new Executive Editor on board. However, the provisions and the payment methodology of the subscription service will not change.

I appreciate F&W's willingness to speak with me frankly, and its efforts to address the problem. Of course, time will tell.

But though it's true that it's the whole Crimson catalog that drives subscriptions, rather than any individual book, I have to agree with authors about the basic unfairness of the subscription payment plan, which rewards longevity over demand and advantages books with lower numbers over the most popular titles--and, unless the number of subscribers grows at a rapid and continuing pace, all but guarantees diminishing returns as the pool of titles expands. In the long run, this may work to Crimson's deficit, as the subscription service will surely stand or fall on the depth of its catalog, and there's currently little incentive for popular authors not to opt out.

I'd love to hear from other Crimson authors about their experiences--either here or in email. I've also invited Crimson and F&W staff to stop by and comment.

-------------------------------

* I've also seen one contract that invalidates the minimum sales threshold entirely if a book is available in print. F&W informed me that this language was part of an initial version of the contract, but was eliminated early on and is not included in current contracts.

** Along with complaints, I received several emails from authors who were happy with their Crimson experience.

...the [Marshall police] department has received about 25 complaints about 2 Moon Press since May 8. It is currently looking into authors’ claims of unpaid royalties, unfulfilled book orders and breaches of contracts, and is also investigating the current owner’s allegations of fraudulent activity against the former owner, Don Semora.

In return, Semora says that he is "proceeding with legal action against both [the current owner Melinda] Lundy and 2 Moon Press." He has denied Lundy's and authors' allegations.